ECB securities financing survey records fourth straight quarter of easing credit terms
The ECB's quarterly SESFOD survey covers how 26 large banks set credit terms in euro-denominated securities financing and OTC derivatives markets. This round shows a fourth consecutive quarter of slight easing, concentrated in pricing, alongside rising valuation disputes in parts of the derivatives market. It is a useful read on how dealers are pricing counterparty risk heading into a period of geopolitical uncertainty.
- Overall credit terms and conditions eased slightly for all counterparty types for a fourth consecutive quarter, mainly through price terms.
- Non-price terms eased slightly for banks and dealers but tightened slightly for hedge funds, whose use of leverage increased slightly.
- Demand for securities financing rose across most collateral types, led by equities at a net 27% of respondents, while haircuts fell for most bond collateral and asset-backed securities.
- Initial margin requirements decreased slightly for FX, interest rate, equity and several credit derivative types, while valuation disputes increased for several derivative types, particularly credit derivatives.
- Results are based on responses from 26 large banks, comprising 14 euro area banks and 12 with head offices outside the euro area.